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Negging the NEG

April 4th, 2018

The proposal of the pompously named “Monash Group” that public funds should be allocated to investment in coal-fired power stations is, of course, absurd. Leaving aside its environmental effects, new coal-fired power is far more expensive than renewables or gas.

Nevertheless, the proposal is welcome in a number of respects.

First, in combination with Turnbull’s Snowy 2.0 proposal, it represents a repudiation, by the conservative side of politics, of the ideology of privatisation. From now on, anyone who wants to make a case against the extension of public enterprise will have to do so on the merits rather than on the ground of free market dogma. Proposals for coal-fired power fail on the merits, but the case for public investment in renewables is strong.

Second, it exposes Turnbull’s National Energy Guarantee for the sham it is. As has been more-or-less admitted by its main architect Kerry Schott, the idea of the NEG is to provide a technology-neutral facade for a set of rules designed to keep existing coal-fired power stations open a little longer. That’s obviously unsatisfactory for anyone who cares about climate change. It’s equally unsatisfactory for those on the right who imagine coal can be kept going forever.

The Monash proposal makes a mockery of the idea, promoted by the Grattan Institute and much of the Canberra commentariat, that the NEG represents some kind of long-term resolution of the debate over climate change policy.

The reality is that no such resolution is possible. Everyone who cares about the enviroment knows that we need a rapid global phase-out of coal-fired power. The Monash Group know this too, but their primary goal is to spite their enemies in the culture war . They are happy to treat the future of the planet as collateral damage. The middle path imagined by Turnbull and Schott is an illusion.

As with gun control in the US, the idea of a compromise here is nonsense. Our only hope is to vote these vandals out and keep them out long enough to make the end of coal irreversible.

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  1. Newtownian
    April 4th, 2018 at 16:39 | #1

    I have to ask whether there is some relationship to our old friends the Lavoisier Group?
    https://en.wikipedia.org/wiki/Lavoisier_Group

    The Monash name selection and mindset appear similar and both groups appeal to techno/scientific giants of the past who are no longer present and hence cant object to nonsense propagated in their names.

    Perhaps the two could unite under the name Canute/Lysenko/Joyce Coalition in honour of other stars of the reality denial club (in fairness to Cnut the Great the real story seems to be a bit more complex https://en.wikipedia.org/wiki/King_Canute_and_the_tide )

  2. Shane From Melbourne
    April 4th, 2018 at 17:50 | #2

    As national economies go down the energy curve in terms of quantity and quality of energy, all sources of energy will be utilized regardless of their origin.

  3. April 4th, 2018 at 19:59 | #3

    JQ: “the case for public investment in renewables is strong.” If so, I’d like to see it.

    Wind and solar energy technology is characterised by low technical risk, low unit size, constant economies of scale, low IP and other barriers to entry, few geographical constraints, few local externalities, and well-known roadmaps for incremental technical improvement. The textbooks would say that these do not suggest the market failures that require muscular state intervention such as public ownership of projects. The one big market failure is the unpriced externalities of fossil fuels, which can be dealt with by taxes on pollution, subsidies to clean technology, or regulation.

    In this case the textbooks would be quite right. Wind and solar have been installed everywhere in huge volumes by private investors responding only to financial and regulatory incentives. This even holds for offshore wind, with much higher risks and minimum scale than onshore. Low barriers to entry have kept both industries competitive and innovative. It looks like a big win for the Third Way approach of capitalism steered by nudges.

    I don’t read any wider lessons into this. We had a huge stroke of luck that wind and solar could be advanced by policies that the dominant neoliberals and (perhaps more important) German ordoliberals could accept. If the only available technologies had been big hydro and nuclear, which require public assumption of the high risks, we would have been catastrophically out of luck.

    The argument emphatically does not apply to the electric grid, a technical monopoly requiring minute-by-minute centralised control. Nor will it apply to massive sequestration: it can be done by the private sector responding to taxes and subsidies, but these will have to be large and permanent.

  4. April 4th, 2018 at 20:32 | #4

    First, in combination with Turnbull’s Snowy 2.0 proposal, it represents a repudiation, by the conservative side of politics, of the ideology of privatisation.

    No, no more than the famous paradox of the socialist millionaire represents a repudiation of the ideology of socialism. As in that case, it may (not “must”) be reconciled as a tactical-practical concession to the constraints of actually existing arrangements. There would need to be further details to rule that out.

    … new coal-fired power is far more expensive than renewables or gas… Proposals for coal-fired power fail on the merits …

    That would be so, as, when and if it were also established that the current downsides were not themselves also the product of distortions. To me any argument either way seems very unclear, not least because of sunk cost issues: even if coal power were shown to have been wrongly established, it might still be worth keeping once there, and contrariwise even if it were otherwise fundamentally sound it might still be worth keeping out once closed down. Indeed, isn’t that just precisely the approach that “Our only hope is to vote these vandals out and keep them out long enough to make the end of coal irreversible” is advocating, and isn’t that itself resorting to that very vandal style of creating new facts as blockages rather than searching for something constructive, a synthesis?

    (You could ask the same sunk cost things about not reviving Australian manufacturing once gone, or keeping it even if it shouldn’t have been set up…)

    Second, it exposes Turnbull’s National Energy Guarantee for the sham it is… It’s equally unsatisfactory for those on the right who imagine coal can be kept going forever.

    It would be just as descriptive to call it an irony rather than a sham, again in the spirit of the socialist millionaire paradox. Maybe it’s the politics of the second best (as measured from the perspective of those who favour it). And, of course, the economics of the second best is no novelty, either.

  5. John Quiggin
    April 4th, 2018 at 20:47 | #5

    @1 Someone I saw commenting on Monash cited my observation that the “Lavoisier Group… is devoted to the proposition that basic principles of physics, discovered by among others, the famous French scientist Antoine Lavoisier, cease to apply when they come into conflict with the interests of the Australian coal industry.”

    https://www.uq.edu.au/economics/johnquiggin/news01/Lavoisier0104.html

  6. I am and will always be Not Trampis
    April 5th, 2018 at 08:34 | #6

    john,

    I was under the impression that Solar and wind power when combined with batteries is far superior to coal in terms of dispatchable power. ( and lets face it they need batteries )
    Am I wrong?

  7. Historyintime
    April 5th, 2018 at 11:04 | #7

    ‘ Leaving aside its environmental effects, new coal-fired power is far more expensive than renewables or gas.’

    Nah, if you take all the subsidies out coal is still cheaper.

  8. Paul
    April 5th, 2018 at 13:20 | #8

    @Historyintime
    Can you provide a source for that, please?

  9. derrida derider
    April 5th, 2018 at 13:46 | #9

    “.. the [Monash Group] proposal is welcome in a number of respects.”
    Indeed, not least in showing to the whole world what a bunch of ignorant old fools the Monash Group are. It firmly marks climate denialism as the province of has-beens and never-wazzes.

    I welcome their getting lots of public attention because I think they are so obviously motivated by tribal malice that even Alan Jones’ listeners will notice.

  10. chrisl
    April 5th, 2018 at 18:48 | #10

    If solar power is so cheap why would China export solar panels and at the same time import coal from Australia? Why not power up with solar?

  11. chrisl
    April 5th, 2018 at 18:59 | #11

    Overall, 1,600 coal plants are planned or under construction in 62 countries, said Urgewald, which uses data from the Global Coal Plant Tracker portal. The new plants would expand the world’s coal-fired power capacity by 43 per cent.
    But none in Australia

  12. Fran Barlow
    April 5th, 2018 at 19:18 | #12

    Chrisl

    Overall, 1,600 coal plants are planned or under construction in 62 countries, said Urgewald, which uses data from the Global Coal Plant Tracker portal. The new plants would expand the world’s coal-fired power capacity by 43 per cent

    Apparently not. The latest breakdown suggests 239 plants of which

    26 are of unknown type
    71 are conventional coal plants
    142 are “HELE” plants.

    Total projected Installed Capacity: 218.5GW

    Source: Global Coal Plant Tracker Database.

    https://twitter.com/simonahac

  13. rog
    April 6th, 2018 at 08:06 | #13

    Turnbull may repudiate the Monash Group on economic grounds but his efforts to reverse AGLs position on Liddell is also in denial of the economics.

    https://www.smh.com.au/business/companies/not-for-sale-agl-s-andy-vesey-defies-malcolm-turnbull-20180405-p4z80k.html

  14. chrisl
    April 6th, 2018 at 08:20 | #14

    Fran 1600 includes the number being planned as well as constructed.
    If renewables are cheaper why isn’t the figure zero as in Australia?
    Why can’t they see it?

  15. Moz of Yarramulla
    April 6th, 2018 at 08:45 | #15

    @chrisl

    But that 1600 number includes more than 20 CCS coal fired plants. Which means it includes at least some plants that aren’t economically viable, let alone environmentally or socially possible. There’s a similar number for nuclear fission plants that’s much larger than the number that are ever likely to be started, let alone finished.

    The reason we don’t have similar numbers of “pending” renewable generators is that those are actually being built so there’s fewer in the backlog. The time from conception to completion is also shorter, which also shrinks the number in an equivalent list.

  16. Ikonoclast
    April 6th, 2018 at 10:25 | #16

    https://www.washingtonpost.com/news/energy-environment/wp/2017/11/13/fossil-fuel-emissions-projected-to-reach-an-all-time-high-in-2017-dashing-hopes-of-progress/?utm_term=.1d4e2bd694c1

    Those who understand capitalism predicted this. Emissions will continue to get worse under late stage capitalism, temporary pauses notwithstanding. Only the crash of capitalism into barbarism or its reformation into democratic socialism can alter our GHG emissions trend growth.

    Capitalism cannot alter course to avoid this crisis. Capitalism actually auto-sets its course for the crisis. It’s very difficult to convince people in this society to think outside the conventional standards of complacency and blind approval for capitalism. Capitalist indoctrination is now close to complete. It will take a real world demonstration, the final collision of endless growth capitalism with environmental limits, to convince the great majority of the reality and seriousness of the situation.

  17. Moz of Yarramulla
    April 6th, 2018 at 10:43 | #17

    @chrisl

    Andrew Blakers has a relevant article in The Conversation answering “If renewables are cheaper why isn’t the figure zero”… politics. Projects have to be politically viable as well as financially and socially. Or at least, some mix of the three. Classic engineering “pick any two” kind of deal – you can have financially disastrous (the Motunui Synfuel plant in NZ, for example) if the political and social will is there. Or you can wreck the population if there’s enough money to pay military as many petrostates do.

    https://theconversation.com/solar-pv-and-wind-are-on-track-to-replace-all-coal-oil-and-gas-within-two-decades-94033

    I sometimes agree with Ikonoclast – our economic system is incapable of changing those parts that can’t work, it will need to be broken by outside forces. But mostly I keep hoping that the economic imperative will become so strong that even the tribal culture of economics will be forced to respond to it.

  18. Fran Barlow
    April 6th, 2018 at 10:54 | #18

    chrisl :
    Fran 1600 includes the number being planned as well as constructed.
    If renewables are cheaper why isn’t the figure zero as in Australia?
    Why can’t they see it?

    The 239 is the *planned* and in construction figure as I understand it. Most of tbose planned will be overtaken by changes in policy. Firm RE is already cheaper than new conventional coal, and far quicker to build.

  19. Kel
    April 6th, 2018 at 12:41 | #19

    @chrisl So 200 being built and 1400 on the drawing board! Is that like I’m a millionaire, I’ve got $20k in the bank and the rest is just around the corner?

  20. BilB
    April 6th, 2018 at 13:25 | #20

    It is a shame John Quiggin that you would not support the idea put forward over ten years ago for a 3 cents per unit levy on electricity retail rates (when the average electricity price was 13 cents per unit) to yield around $8 billion for a fund to be tendered to to build renewable infrastructure at best managed return to the consumer. That proposal would have had Australia $80 to $100 billion towards a decarbonised electricity production sector with lower electricity prices.

    http://www.playwithcarbon.com/ This is what we should be doing with our Coal Carbon for a $ yield 500 times greater than turning it into CO2. Google Arctic-News to see just how screwed our environment is, and now how desperately we should be acting.

    Good to see that one country, Portugal with population of 10 million and area 92,000 square kilometres is achieving the optimal renewable result of 104% renewable energy in March.

  21. Paul
    April 6th, 2018 at 14:20 | #21

    chrisl :
    Fran 1600 includes the number being planned as well as constructed.
    If renewables are cheaper why isn’t the figure zero as in Australia?
    Why can’t they see it?

    Renewables are particularly competitive in Australia because we have such excellent renewable resources, both solar and wind. We also have a lot of land.

    It’s also possible that other countries have their Monash forum-equivalents that are building old technology plants on purely ideological grounds.

  22. Fran Barlow
  23. John Quiggin
    April 7th, 2018 at 16:40 | #23

    @BilB

    I don’t remember this proposal, so I’m not sure that I refused to support it (can you point to a link). Ten years ago, I might have had higher hopes for an economy-wide carbon price.

    From today’s perspective, it seems roughly equivalent to the Renewable Energy Target, so there is no obvious reason to oppose it, except on the political grounds that we have the RET and should defend it, rather than trying something new.

  24. rog
    April 7th, 2018 at 19:26 | #24

    @chrisl The other day I read that it was 150. It seems pointless discussing the number as it’s obvious that the investment in renewables is more attractive than an investment in coal.

    All of a sudden the market dictated the terms.

  25. chrisl
    April 7th, 2018 at 21:02 | #25

    Rog The number of planned or under construction coal fired power stations (1600)comes from a reliable source that is AGAINST coal fired power stations. You claim the number is 150. The question is why is the number not zero if renewables are cheaper? There is no market for electricity in Australia because it is distorted by government mandates. Why the need for RET or NEG if renewables are indeed cheaper. Not to mention unreliable. Today was overcast and windless. Where on earth did the power come from?

  26. rog
    April 7th, 2018 at 21:49 | #26

    @chrisl As you hadn’t provided a source I felt free to look it up,

    “Currently, over 1 600 new coal plants and units are planned or under development in 62 countries. If built they will add over 840 000 MW to the global coal plant fleet.”

    Miningreview.com

    But that is old news, reports of cancellations and/or delays indicate otherwise;

    “In 2017, the number of plants in the permitting and planning process fell by 22 per cent compared to 2016, bringing the decline to 59 per cent over the last two years.”

  27. Collin Street
    April 8th, 2018 at 07:24 | #27

    There is no market for electricity in Australia because it is distorted by government mandates.

    Dude, I’m just going to be up-front and blunt here: this sentence categorically demonstrates that you have no role to make useful comments about… pretty much any economic issue ever. Government intervention is inherent in all markets everywhere, as private property is created by the state.

    [like… what you write is so ignorant as to call your mental stability into question, and I’m not being even a teeny bit hyperbolic here]

  28. BilB
    April 8th, 2018 at 08:37 | #28

    John Quiggin,

    It was before the election of Rudd and, yes, the focus was on market mechanisms. However, even then the tone was one of needing urgent action so the uncertainty of a market mechanism was risky as has been proven. The only comment that the proposal got on both LP and JQ was “this would create a slush fund, and we all know what happens to slush funds”, which too will come to pass if the LNP use the RET to build coal infrastructure.

    The levy approach would have yielded $8 billion per year for direct investment while keeping the retail electricity price under 17 cents per unit at the time. Is $8 billion the annual fund size for the RET?

    Now the need for action is way beyond urgent when you see what is happening in the Arctic now. The warnings of Sir Ian Axford (the scientist who did the calculations on the interaction of Earth’s magnetic field and the Solar Wind, now deceased) of the imminent risk of the perma frost thaw were ignored, and not even calculated in to the IPCC determinations, and the permafrost is in full on collapse. see the Arctic-News website.

    The tone in the scientific community has changed from we can arrest this, to how bad will it be. Disasterously, still we have politicians doing their best to bury climate action.

    The only good news is that at least one country, Portugal, has managed to mostly decarbonise their electricity sector with their March month yielding 104% renewable energy.

    Australia should have been close behind.

  29. BilB
    April 8th, 2018 at 08:49 | #29

    More on the what we should be doing with our coal front…..

    https://www.materialstoday.com/carbon-fiber/news/tech-could-transform-coal-into-carbon-fiber/

    Check ou the image of Prof Eric Eddings holding a lump of coal. Look familiar? We’ve seen this very posture in out parliament from the likes of Scot Morrison and Barnaby Joyce both of whom valued that kilogram of coal at 10 cents to make CO2, whereas Eric Edding wants to, and can, turn that one kilogram of coal into $70 worth of Carbon Fibre (the price I pay for the fibre I buy).

    Do you see the difference between the grasp on reality between our politicians and science based engineers?

  30. BilB
    April 8th, 2018 at 08:49 | #30

    By the way that coal to fibre tech project is a $1.6 million dollar investment. Consider the potential returns on that to the $500 million that Peter Beattie, another politician, handed over for “Clean Coal” research, not to mention the federal waste.

    https://reneweconomy.com.au/audit-office-slams-australias-dud-investments-in-clean-coal-90953/

    ..included is the “alpha males and the lump of coal” image.

  31. rog
    April 8th, 2018 at 10:50 | #31

    @BilB

    That audit on CCS is below. There was $2B allocated;

    “The CCS Flagships projects are yet to reach the stage of deployable technology as originally envisaged in the program design. It is unclear whether the program is capable of delivering on its strategic policy objective as the program is due to close in 2020, and all program funding is currently committed.”

    https://www.anao.gov.au/work/performance-audit/low-emissions-technologies-fossil-fuels

  32. April 8th, 2018 at 11:08 | #32

    Rog, that is almost certainly dead money.

    The point being made is that with a fraction of that expenditure directed to other uses for coal, cardon fibre production and epoxy resin production, can yield 500 times the return than thermal coal, or 5 times the return for 1/100th of the resourse depletion rate with the end product being the environmental equivalent of bio char.

    The problem here is that the government is ideologically locked into an anti climate action platform and cannot see past it.

    Turnbull’s whole argument that preserving old coal stations will deliver lower electricity prices is demonstrably false due to the altered carve up of the revenue pie with the transmission (wheeling) taking a full 50% of the gross revenue. So unless Turnbull is planning a sneak attack on the transmission industry contracts, nothing Freydenfella does will make any difference to retail electricity rates.

  33. rog
    April 12th, 2018 at 21:27 | #33

    A more complete analysis of coal and electricity is below.

    “But, crucially, coal stations are not being used as much. The amount of electricity produced across the planet by burning coal has fallen each year since 2013.

    “A distinction needs to be kept in mind between capacity and electrical output,” Nace says. “Even though there are more power plants, the actual production of electricity from those plants – and likewise the amount of coal used worldwide – has fallen every year since 2013, with a small drop in 2014 and larger drops in 2015 and 2016.”

    https://www.theguardian.com/environment/2017/oct/16/world-going-slow-coal-misinformation-distorting-facts

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